Standing Order vs Direct Debit

Direct Debit and Standing Order are both automatic payment methods but have some important differences.

Standing orders and Direct Debit are two of the most common methods used for taking regular payments. They are often confused because they do accomplish broadly the same thing – letting you collect money from a customer’s account on a set date, however, there are some subtle but crucial differences between the two.

What are Standing Orders and Direct Debit?

1. Direct Debit and Standing Order are both automatic payment methods

  • A standing order is an instruction your customer gives to their bank to pay you a fixed amount at regular intervals whether this is weekly, monthly, quarterly or yearly. 

  • With Direct Debit, your customer authorises you to collect money directly from their bank account whenever a payment is due. Direct Debit payments can vary in frequency and amount. 

2. You control a Direct Debit. Customers control a standing order

  • A standing order is set up by customers. They choose the amount and frequency, and can change or cancel it without notifying you. 

  • In contrast, you have full control over the payments you take by Direct Debit. You decide how much and how often you collect from customers. You can vary the amount and frequency of collections without further authorisation from the customer and are notified automatically by the Direct Debit system of any cancellations or failures.

Direct Debit vs Standing Order

Here’s a quick comparison of the two payment methods for you:

Standing Order Direct Debit
Set up No provider needed. Your customer controls the set up. You are dependent on them. This is unfeasible if you have > 25 customers. Bank/provider needed. You control the set up and the amount and date of payments.
Cost per payment Ostensibly free. You may incur a small charge from your bank for each payment. Low. Expect to pay 20 - 40p or 1%, depending on your provider.
Failure rates and notifications Vary by industry. No notifications. It can take more than a month to find out about failures then you’ll need to chase the customer to set up another payment. Very Low. < 1% with GoCardless. Automatic notification. You are notified automatically of failures and can re-submit the payment when you want to.
Flexibility of payments Fixed payments at regular intervals only. If you need to amend the amount or date of a payment, the standing order will need to be cancelled and a new one set up. You will need to convince customers to change the standing orders themselves! High. You can collect variable amounts or change the amount or date of payments without asking customers for further authorisation.
Risk of late payment Medium - high. Once set up, low risk, but many businesses struggle to get customers to set up their standing order quickly, or to amend it as required. Low. You can charge customers when a payment is due.
Admin required High.
  • Check bank statement daily to see what payments
  • No notification when a payment fails
  • Manually update your accounts
Very low.
  • Automatically submit 1000s of payments at once
  • Automatically update your accounts
  • Instant notifications when payments fail
  • Easily track payments without checking bank statements
Customer protection Low. No customer protection once payments are made. This gives merchants greater protection. High. Immediate refunds from your bank in the event of an incorrect payment.

Should I use standing order or Direct Debit?

Which is the right option for you depends on two key things:

  1. Your organisation size
  2. Your customer base
  3. Your payments

1. Standing orders are great for very small organisations

If you have less than 25 customers, standing order may be a good option for you. Standing orders are great for smaller organisations or clubs with close relationships with their members.

However, if you have more than 25 customers Direct Debit is probably a better option for you. With a standing order, you will always need to check your bank account when a payment is due to find out whether a payment has actually been set up or if a payment has failed. On the other hand, with Direct Debit you set up the payments so you'll know that everything's in place. What's more, you'll be notified of any failures straight away so you'll always know when you have and haven’t been paid without needing to trawl through your accounts.

2. Standing order is good if you are close to your customers

If you have less than 25 customers who you can trust to set up a standing order when asked and continue to make the payments this could be a great option for you as your customer does all the hard work for you.

However, if you aren’t sure whether you can trust your customers to set up or maintain a standing order then Direct Debit could be a better option for you.

3. Standing order is only suited to regular, fixed payments

Both Direct Debit and standing order are great for regular, fixed payments like rent or subscriptions. However, standing order isn’t great for paying bills with variable amounts or frequencies such as utility bills or credit card debts or where you may want to increase fees or upgrade subscriptions in the future. One of the greatest benefits of Direct Debit is its flexibility. You are in control so you can adjust the amount or frequency of payments whenever you need to (as long as you give your customer the required advance notice.

Both standing order and Direct Debit could be used to make one-off payments – although neither of them are typically thought of as one off payment methods. Similarly to with regular payments, Direct Debit means you control the payment so you know that the payment has been set up and when you’ll receive it so there’s no chance of a customer forgetting to set up their standing order or setting it up on the wrong date.

If you think Direct Debit might be for you and would like to find out more about how GoCardless could help you to make your payments process cheaper and easier, our features page is a good place to start.

‹ View table of contents Next page ›

Latest features

How Direct Debit can drive key SaaS metrics

How can Direct Debit impact the numbers you care most? Find out as we explain the relationship between Direct Debit and four key SaaS success metrics.

How to maximise Direct Debit uptake

From automation and flexibility to low transaction costs and low failure rates, the benefits of Direct Debit have even more impact when more customers are using it. Find out how you can encourage more of your customers to pay by Direct Debit.

Hidden costs of business that can eat up your investment

Some business costs have a habit of dropping under the radar – until you reach scale and it turns out that they represent a major cost to your profitability.

View all

Reference guides

View all

By using this site you agree to the use of cookies for analytics, personalised content and ads. Learn more